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Trump impeachment is likely, but impact on financial markets would be short-lived

London, UK, 10/11/19,  by Amundi

  • Impeachment process: The Democratic Party has announced the opening of an impeachment inquiry against President Donald Trump following revelations that he pushed Ukrainian President Volodymyr Zelenskiy to investigate the son of Democratic opponent Joe Biden. The impeachment process is long and articulated. An 80% probability that Trump will be impeached, followed by acquittal in the Senate, which would keep him in office for the remainder of his term, is our base case scenario.
  • Impact on the US economy and Fed policy: Under a scenario of intense political conflict, Washington may not be able to pass any meaningful legislation, such as the ratification of the US-Mexico-Canada Trade Agreement. Sentiment could suffer during the impeachment process, but it is unlikely to impact the US economy meaningfully.
  • Implications for fixed income investors: Historically, the impeachment process has had no direct effects on the economy and short-lived impact on financial markets. While US interest rates may rally from a flight to quality in response to impeachment headlines, we believe that this would be short-lived. The economic and inflation outlook, and consequently Fed policy, will be the main driver of interest rates, beyond short-term political noise.
  • Implications for equity investors: On US equities, we do not see any implications from the potential impeachment of President Trump. Higher risks come from a potential gain in popularity of presidential candidates that favour increased regulations and additional public spending financed through tax increases. It may also lead to the inability of the Trump administration to reach trade agreements with economic partners. This could add uncertainty at a time when the market is already dealing with earnings downgrades. We are defensive on US equities, with a focus on quality companies that trade at reasonable valuations to guard against potential downside risks.
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Amundi is the European largest asset manager by assets under management1 and ranks in the top 10 globally[1]. It manages 1,653 billion[2] euros of assets across six main investment hubs[3]. Amundi offers its clients in Europe, Asia-Pacific, the Middle East and the Americas a wealth of market expertise and a full range of capabilities across the active, passive and real assets investment universes. Clients also have access to a complete set of services and tools. Headquartered in Paris, Amundi was listed in November 2015.

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Footnotes

  1. Source IPE “Top 400 asset managers” published in June 2019 and based on AUM as of end December 2018
  2. Amundi figures as of December 31, 2019
  3. Investment hubs: Boston, Dublin, London, Milan, Paris and Tokyo

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